On August 8, 2019, Fannie Mae and Freddie Mac (GSEs) announced that the revised uniform residential loan application (URLA) form will not include a question about the applicant’s language preference.1 However, the GSEs indicated that a “voluntary consumer information form will be developed to collect this information.” The announcement also delays until further notice the February 1, 2020 deadline for lenders to begin using the revised URLA. According to the announcement, the GSEs were directed to take these actions by their regulator and conservator, the Federal Housing Finance Agency (FHFA). The FHFA’s direction is an apparent about-face from the agency’s decision in November 2017 to place this question on the URLA form.
The URLA form is important not only because the GSEs require its use for single family loans to be sold to or guaranteed by them, but also because the Consumer Financial Protection Bureau (CFPB) has approved the URLA as a safe harbor from liability under certain CFPB rules,2including Regulation B, which prohibits creditors from asking about an applicant’s race, ethnicity, or sex, unless specifically required by law.3 For most mortgage credit transactions, the creditor is specifically required to collect an applicant’s race, ethnicity, and sex, using certain categories, and to make the disclosures as set forth in Regulation B and in Regulation C, which implements the Home Mortgage Disclosure Act (HMDA).4 In practice, the URLA is comprehensively used throughout the conventional mortgage loan industry, regardless of whether the lender’s loans are eligible for sale to the GSEs.
How did we get here?
In August 2016, the GSEs published a revised URLA following several months of design, stakeholder input, and lender/consumer testing.5 A few months before, the FHFA and the GSEs had considered adding a language preference question to the form, stating that consumer advocates “reported that servicers often do not communicate effectively with LEP [“Limited English Proficiency”] borrowers who were delinquent or facing foreclosure because they often did not know the language of the borrower.”6 However, the question was not included after industry representatives raised a host of practical issues and questions regarding the scope of a lender’s obligation to communicate in a borrower’s preferred language.7
In May 2017, the FHFA sought public input on whether to include the language preference question on the form, citing issues of language access for mortgage applicants.8 Industry representatives raised several concerns, including whether a lender would be charged with unfair, deceptive, or abusive practices for communicating in English with individuals whose preference was for a language other than English.9 These commenters asked whether a lender could limit the number of languages in which it would communicate with applicants and borrowers, and whether a lender could provide some, but not all, communications in a borrower’s preferred language.10
After taking comments and engaging in consumer testing, FHFA announced in October 2017 that it would publish a revised URLA that would include the language preference question.11 FHFA explained that the question would “allow borrowers who prefer to communicate in a language other than English to identify that language and to enable mortgage industry participants to connect borrowers to available language access resources.”12 However, FHFA noted that the revised URLA included statements to address legal concerns about the question. These statements included information to the effect that answers would not negatively impact the credit decision and that the transaction “is likely to be conducted in English.”13
As indicated above, the GSEs have now announced that the URLA will not include the language preference question after all, and that this information instead will be requested in a separate voluntary consumer information form. Presumably, this latest change was precipitated by the expression of further industry concerns relating to requesting this information in the URLA itself.
Specific details regarding the voluntary consumer information form were not provided by the GSEs. The GSEs’ announcement raises several questions, including whether the voluntary consumer information form will be optional or required for lenders, and what new deadline will be set for any mandatory use of the revised URLA and consumer information form. Also left unanswered is what liability, if any, a lender or servicer will have if a LEP applicant/borrower does not indicate a language preference in the consumer information form.
To further complicate the issue, while the GSEs consider how to collect language preference information, the CFPB is having its own second thoughts about some of its rules for collecting data on race and ethnicity that could impact the revised URLA. In 2015, the CFPB amended its HMDA rules to include new subcategories of race and ethnicity for mortgage applicants to use, and these are currently listed on the revised URLA.14 However, in May 2019, the CFPB solicited comments on whether it should reconsider its 2015 amendments to the HMDA data collection rules in light of feedback about regulatory burden.15 At that time, the CFPB noted comments from lenders that the new subcategories can “prolong and complicate the application process.”16 Any revision of the CFPB’s race and ethnicity data request rules will necessitate further revision of the URLA. Comments regarding the race and ethnicity data request provisions are not due to the CFPB until October 25, 2019, so a completion of the revised URLA and voluntary consumer information form this year appears increasingly unlikely.17 More action is expected in 2020.
We will be monitoring these areas for further developments.
2 81 FR 66930 (Sept. 29, 2016) and 82 FR 55810 (Nov. 24, 2017).
3 12 CFR 1002.5(b).
4 12 CFR 1002.13 and 12 CFR 1003.4(a)(10).
6 FHFA Improving Language Access in Mortgage Origination and Servicing, May 25, 2017, p. 6, available at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/Language_Access_RFI.pdf.
9 Letter from the American Bankers Association, Consumer Bankers Association, Housing Policy Council of the Financial Services Roundtable, and the Mortgage Bankers Association, July 31, 2017 (“Joint Trades Letter”).
10 Joint Trades Letter at 3.
14 80 FR 66128 (Oct. 28, 2015).
15 84 FR 20049.
16 Id. at 20051.
17 84 FR 31746 (July 3, 2019).
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved